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Telecommunications Law and Regulation

Third Edition
Telecommunications
Law and Regulation
Third Edition
EDITED BY
Ian Walden
1
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Contents Summary
PREFACE xiii
CONTRIBUTORS xv
TABLE OF CASES xxiii
TABLES OF LEGISLATION xxix
ABBREVIATIONS xli
GLOSSARY li
PART I: THE FUNDAMENTALS
1. TELECOMMUNICATIONS LAW AND REGULATION:
AN INTRODUCTION 3
2. COMMUNICATIONS TECHNOLOGIES, SERVICES,
AND MARKETS 23
3. THE ECONOMICS OF TELECOMMUNICATIONS REGULATION 55
PART II: REGULATORY REGIMES
4. THE TELECOMMUNICATIONS REGIME IN THE UNITED
KINGDOM 121
5. EUROPEAN UNION COMMUNICATIONS LAW 167
6. US TELECOMMUNICATIONS LAW 211
PART III: KEY REGULATORY ISSUES
7. AUTHORIZATION AND LICENSING 295
8. ACCESS AND INTERCONNECTION 391
9. COMPETITION LAW IN TELECOMMUNICATIONS 441
10. TELECOMMUNICATIONS, INTELLECTUAL PROPERTY,
AND STANDARDS 499
PART IV: TELECOMMUNICATIONS TRANSACTIONS
11. CAPACITY AGREEMENTSFROM MICROWAVES TO
MOBILE VIRTUAL NETWORK OPERATORS 539
12. COMMUNICATIONS OUTSOURCING 559
PART V: COMMUNICATIONS CONTENT
13. COMMUNICATIONS PRIVACY 591
14. CONTENT REGULATION 627
PART VI: INTERNATIONAL REGULATORY REGIMES
15. INTERNATIONAL TELECOMMUNICATIONS LAW 715
16. TELECOMMUNICATIONS REFORM IN DEVELOPING
COUNTRIES 763
17. DESIGNING REGULATORY FRAMEWORKS FOR DEVELOPING
COUNTRIES 829
INDEX 883
vi Contents Summary
Contents
PREFACE xiii
CONTRIBUTORS xv
TABLE OF CASES xxiii
TABLES OF LEGISLATION xxix
ABBREVIATIONS xli
GLOSSARY li
PART I: THE FUNDAMENTALS
1. TELECOMMUNICATIONS LAW AND REGULATION: AN INTRODUCTION 3
1.1 The Subject Matter 3
1.2 The Telecommunications Sector 4
1.3 Technology and Terminology 5
1.4 Telecommunications Law and Regulation 7
1.5 Liberalization and Regulation 9
1.6 Liberalization and Privatization 10
1.7 Policy, Law, and Regulation 11
1.8 Regulatory Framework 13
1.9 Regulatory Powers 14
1.10 Regulatory Models and Methods 16
1.11 Regulation and Competition Law 18
1.12 Regulation and Standards 20
1.13 Regulating in the Global Economy 21
1.14 Concluding Remarks 22
2. COMMUNICATIONS TECHNOLOGIES, SERVICES, AND MARKETS 23
2.1 Introduction to Communications Technologies 23
2.2 Fixed (Telephony) Networks 38
2.3 Mobile Networks 43
2.4 Satellite Networks 47
2.5 Wireless Networks 48
2.6 Number Portability 50
2.7 Conclusions 53
3. THE ECONOMICS OF TELECOMMUNICATIONS REGULATION 55
3.1 Introduction 56
3.2 Rationale for Regulation 56
3.3 The Principles of Economic Regulation 57
3.4 Forms of Economic Regulatory Control 58
3.5 Setting the Price Cap 59
3.6 Structure of the Regulated Industry 62
3.7 The Economics of Telecommunications 64
3.8 The Privatization of BT in the UK 68
3.9 Retail Price Regulation in the UK 70
3.10 Rebalancing 77
3.11 Access Decit Charges 78
3.12 Social Obligations and Further Constraints on Retail Prices 81
3.13 The Need for an Effective Interconnection Regime 85
3.14 Other Market Developments 104
3.15 Market Denition 106
3.16 Designation of Dominance 110
3.17 Market Reviews 116
3.18 Conclusions 116
PART II: REGULATORY REGIMES
4. THE TELECOMMUNICATIONS REGIME IN THE UNITED KINGDOM 121
4.1 Early History of the Development and Regulation of the
Telecommunications Industry 121
4.2 Development of the Industry 128
4.3 Development of Regulation in the Late Twentieth Century 132
4.4 Key Issues 154
5. EUROPEAN UNION COMMUNICATIONS LAW 167
5.1 Introduction 167
5.2 Evolving Policy and the Regulated Sphere 168
5.3 Sources of Law 173
5.4 Liberalization of the EU Telecommunications Market 176
5.5 Harmonization of the EU Telecommunications Market 185
5.6 Signicant Market Power 187
5.7 Regulatory Authorities 192
5.8 Universal Service 199
5.9 End-User Rights and Consumer Protection 205
5.10 Future Directions 208
6. US TELECOMMUNICATIONS LAW 211
6.1 Introduction 211
6.2 Regulatory Law and Policy: History and Developments 212
6.3 Overview of Key US Regulatory Bodies and Procedural Principles 226
6.4 Federal Bodies 227
6.5 State Bodies 232
6.6 Procedural Principles and Mechanisms:
The Administrative Procedure Act and Administrative Law Principles 233
6.7 The Pre-emption Doctrine and FCC Jurisdiction 235
6.8 The Licensing of Common Carriers 237
6.9 Access, Interconnection, and Related Measures 240
6.10 Spectrum Management 253
6.11 Broadband 257
viii Contents
6.12 Universal Service Obligations (USOs) 264
6.13 Competition Law 269
6.14 Communications Privacy 276
6.15 IP-enabled Services 290
PART III: KEY REGULATORY ISSUES
7. AUTHORIZATION AND LICENSING 295
7.1 Introduction 295
7.2 Licences: Privileges and Necessities 298
7.3 International Law and Telecommunications Licensing Standards 321
7.4 The EUs Licensing Regime 323
7.5 Conclusions 387
8. ACCESS AND INTERCONNECTION 391
8.1 Introduction 391
8.2 Basic Concepts and Terminology 393
8.3 Access and Interconnection Regulation 399
8.4 The Lead-up to the Access Directive 409
8.5 Current Regulatory Obligations in Relation to Access and
Interconnection 409
8.6 Practical and Contractual Issues in Negotiating
Circuit-Switched Access Agreements 429
8.7 Practical and Contractual Issues in Negotiating IP Interconnection
Agreements 433
8.8 Concluding Remarks and Future Trends 440
9. COMPETITION LAW IN TELECOMMUNICATIONS 441
9.1 Regulation through Competition Law 441
9.2 Management and Manipulation of the Market Structure
by Government 443
9.3 Control of Behaviour through Mainstream Competition Rules 446
9.4 Mainstream Competition Law: The Long StopThe
Enterprise Act 2002 462
9.5 Special Competition Rules for Telecommunications
(Signicant Market Power) 463
9.6 Market Failure of CompetitionSector-specic Rules 469
9.7 Procedures for Enforcement of the Competition Rules 480
9.8 Structural Controls: Regulation through Merger Control 485
9.9 EC State Aid Rules and Telecoms 495
9.10 Outstanding Policy Issues 497
10. TELECOMMUNICATIONS, INTELLECTUAL PROPERTY, AND STANDARDS 499
10.1 Introduction 499
10.2 Standards 501
10.3 Technical Standards and Telecommunications 505
10.4 A Difculty for the Standards Process: Intellectual Property 511
10.5 Illustrating the Difculty between IP and
Telecommunication Standards 517
Contents ix
10.6 Attempting to Square the Circle: The Role of the SDO 521
10.7 The Inuence of Hard Law 527
10.8 New SDOs: Some Issues 529
10.9 Conclusion 534
PART IV: TELECOMMUNICATIONS TRANSACTIONS
11. CAPACITY AGREEMENTSFROM MICROWAVES TO
MOBILE VIRTUAL NETWORK OPERATORS 539
11.1 Introduction 539
11.2 Types of Capacity Agreement 542
11.3 Key Contractual Issues 548
11.4 Regulatory Issues 554
11.5 Emerging Trends 556
12. COMMUNICATIONS OUTSOURCING 559
12.1 Introduction 559
12.2 Types of Communications Outsourcing 566
12.3 Regulatory Issues Specic to Communications Outsourcing 571
12.4 Transferring the Infrastructure 571
12.5 Contractual Issues Specic to Communications Outsourcing 574
12.6 Guaranteeing Service Levels 579
12.7 Technology Platform 583
12.8 Ensuring Charges Remain Competitive 585
12.9 Pan-European and Other International Considerations 586
12.10 Future Trends in Communications Outsourcing 587
PART V: COMMUNICATIONS CONTENT
13. COMMUNICATIONS PRIVACY 591
13.1 Introduction 591
13.2 Interception, Monitoring, and Recording of Communications 604
13.3 Privacy and Electronic Communications (EC Directive)
Regulations 2003 611
13.4 Itemized Bills 612
13.5 Calling or Connected Line Identication 612
13.6 Directories 613
13.7 Use of Telecommunications Services for Direct Marketing Purposes 614
13.8 General Application of the Data Protection Act 1998 to the
Communications Sector 616
13.9 Concluding Remarks 626
14. CONTENT REGULATION 627
14.1 Introduction 627
14.2 Development of the UK Licensing Framework 636
14.3 The Community Dimension and International Practice 640
14.4 UK Regulation of Content 659
14.5 Duties of Ofcom 664
14.6 The Regulatory Framework for Television and Radio 670
x Contents
14.7 Television Licensing 676
14.8 The Regulatory Framework for Sound Broadcasting 688
14.9 The British Broadcasting Corporation 689
14.10 Premium Rate Services 696
14.11 Other Bodies 704
PART VI: INTERNATIONAL REGULATORY REGIMES
15. INTERNATIONAL TELECOMMUNICATIONS LAW 715
15.1 Introduction 715
15.2 International Network Infrastructure 717
15.3 International Telecommunications Union 728
15.4 World Trade Organization 746
15.5 Concluding Remarks 760
16. TELECOMMUNICATIONS REFORM IN DEVELOPING COUNTRIES 763
16.1 Introduction 763
16.2 Characteristics Pre-Reform 765
16.3 Impetus for Undertaking Reform 767
16.4 Government Objectives 777
16.5 Content of the Reform Process 781
16.6 Creating a Regulatory Authority 787
16.7 Modernizing the Incumbent 801
16.8 Attracting New Entrants 813
16.9 Managing Disputes in the Aftermath of Privatization
and Liberalization 821
16.10 Conclusion 827
17. DESIGNING REGULATORY FRAMEWORKS FOR DEVELOPING COUNTRIES 829
17.1 Introduction 829
17.2 Models for Regulatory Reform: Looking to the Developed World 831
17.3 Differing Characteristics in the Developing World 836
17.4 Role of Competition Law 840
17.5 Building Blocks for Regulatory Frameworks in Developing
Countries 846
17.6 Conclusion 882
INDEX 883
Contents xi
Preface
The origins of this book lie in a University of London LLM course in Telecom-
munications Law, for which I became responsible and taught on when I joined the
Centre for Commercial Law Studies, Queen Mary, University of London, in 1992.
One problem faced by our students in those early days was the lack of a suitable
textbook, as those targeted at the professional adviser market were priced appropri-
ately. The first edition, published by Blackstone in 2001, was the affordable and
accessible single work that we felt was missing in the market. A second edition was
published in 2005 by Oxford University Press. For this third edition, my co-editor,
John Angel, has stepped down from the role due to his current commitments as Chair
of the Information Tribunal. However, I would like to record my thanks to John for
his invaluable input to this project since its inception.
This edition substantially updates and extends the scope of the second edition. In
terms of new material, all the chapters have again changed and grown significantly,
reflecting the ongoing legal and regulatory developments occurring in the sector.
New chapters have been included on Communications Technology, Markets, and
Services (Sharpe) and Capacity Agreements (Williams and Maguire). The organiza-
tion of the book has also been restructured into six parts: Fundamentals; Regulatory
Regimes; Key Regulatory Issues; Telecommunications Transactions; Communications
Content; and International Regulatory Regimes.
The telecommunications sector continues to be of strategic importance to states,
both as an activity in its own right as well as an infrastructure over which trade is
carried out. Rapid technological and market developments confront the legal frame-
works that are designed to regulate the sector, challenging legislators, regulators, and
advisers. This book attempts, but inevitably fails, to keep up with such developments
and the challenges they generate. While the law should be correct up to July 2008,
the issues discussed will continue to occupy law students and professional advisers
in the coming years.
Professor Ian Walden
Institute of Computer and Communications Law
Centre for Commercial Law Studies, Queen Mary, University of London
Of Counsel, Baker & McKenzie
August 2008
Contributors
THE EDITOR
Dr Ian Walden is Professor of Information and Communications Law and head of
the Institute of Computer and Communications Law in the Centre for Commercial
Law Studies, Queen Mary, University of London. His publications include EDI and
the Law (1989), Information Technology and the Law (1990), EDI Audit and Control
(1993), Cross-border Electronic Banking (1995, 2000), Telecommunications Law
Handbook (1997), E-Commerce Law and Practice in Europe (2001), Telecom-
munications Law and Regulation (2001, 2005, 2009), Computer Crimes and Digital
Investigations (2007) and Media Law and Practice (forthcoming 2009). Ian has been
involved in law reform projects for the World Bank, the European Commission,
UNCTAD, UNECE, and the European Bank of Reconstruction and Development, as
well as for a number of individual states. In 199596, Ian was seconded to the
European Commission, as a National Expert in electronic commerce law, and he is a
member of the Legal Advisory Board to the Information Society Directorate-General
of the European Commission. Ian has held visiting positions at the Universities of
Texas and Melbourne. Ian is a solicitor and is Of Counsel to the global law firm Baker
& McKenzie (www.bakernet.com) and is a Trustee and Vice-Chair of the Internet
Watch Foundation (www.iwf.org.uk).
THE CONTRIBUTING AUTHORS
John Angel is a solicitor. He is chairman of and presides over the Information
Tribunal. He has been appointed interim judicial lead of the General Regulatory
Chamber. He is a Visiting Professor at the Institute of Computer & Communications
Law, Centre for Commercial Studies, Queen Mary, University of London and has
a number of publications to his name including being consultant editor to Electronic
Business Law, Butterworths LexisNexis, joint editor and author of both Computer
Law (6th edn) and Telecommunications Law (2nd edn), Oxford University Press
and general editor and author of Technology Outsourcing, Law Society Publishing.
He was formerly Head of Online Legal Services at Clifford Chance, practised tech-
nology law at Theodore Goddard and previous to that held a number of senior (non-
legal) management positions in the IT industry.
Ann Buckingham holds LLB(Hons) and BA degrees from Victoria University of
Wellington, New Zealand, and a BCL degree from Oxford University, where she was
awarded the Vinerian Scholarship. She is qualified in California, England and Wales,
and New Zealand, and is a lawyer in Latham & Watkins top-ranked communications
and corporate groups, based in San Diego, California. Ann has advised numerous com-
panies, investment banks, governments, and regulators on regulatory restructuring,
licence auctions, corporate transactions, and privatizations in the communications sec-
tor, with a particular focus on developing countries. Email: ann.buckingham@lw.com.
Camilla Bustani holds a BA (Hons) from Harvard University and a Masters in
International Affairs from Columbia University, as well as a BA (Hons) in Jurisprudence
from Oxford University. She worked at Clifford Chance for eight years, focusing
primarily on telecommunications sector regulatory reform in developing countries,
and public international law aspects of telecommunications regulation and sector
liberalization. She has been at Ofcom since 2006, where she is project managing
Ofcoms involvement in the review of the European framework for the regulation of
electronic communications markets, and in the European Regulators Group (ERG).
Lisa Correa is a visiting research fellow at Queen Mary & Westfield College,
University of London and holds a PhD in economics. She currently works as a
Senior Economist in Ofcoms Chief Economist Team and has worked on, amongst
many other regulatory and competition projects, the Strategic Review of
Telecommunications. Prior to joining Ofcom, she worked as a consultant for NERA
Economic Consulting where she worked on numerous telecoms projects covering
competition, tariff, and public/social policy issues. In addition, she has worked in the
UK telecommunications industry as an economist at Mercury Communications, now
called Cable & Wireless Communications. Some of the projects she worked on there
include the 1997 Retail and Network Price Cap, the Labour Party proposals for
Regulation, Mobile Interconnection, Fixed/Mobile Convergence, Number Portability
and Numbering where she was the Chair of the Industry Steering Group for the Year
2000 Numbering Change Implementation.
Alan Cunningham, previously Herchel Smith Research Fellow, Queen Mary,
University of London, completed his PhD in 2007. Currently living in Berlin,
researching for work regarding how rationality (including legal thought), in ignoring
context and disregarding personal/emotional/holistic involvement, separates, isolates,
and individualizes, with negative effect. Email: cunningham.am@gmail.com.
Anne Flanagan, BA (St Johns, New York), JD (Brooklyn Law School, New York),
LLM (Lond), is Senior Lecturer of Communications Law, Queen Mary, University
of London, Centre for Commercial Law Studies. Anne lectures on the QMUL LLM
courses in Information Law and Communications Law. She also teaches distance
learning LLM courses in Privacy and Data Protection Law, International
Telecommunications Law, European Communications Law, and Information and
Communications Technology and Competition Law. She is the author and chief
xvi Contributors
examiner of the University of London External LLM Telecommunications course.
Anne has been involved in law reform projects for the European Commission and
the European Bank for Reconstruction and Development. She was Visiting Professor
at the Institute of Comparative Law Angelo Sraffa, Bocconi University of Milan
and visiting scholar at Brooklyn Law School.
Anne is a New York State licensed attorney. She has practised law in the financial
services industry at Wilson, Elser, Moskowitz, Edelman and Dicker, and at TIAA-
CREF, one of the largest financial services companies in the United States where she
served as counsel to the IT divisions. She also served as Director, State Government
Relations for the National Association of Insurance Brokers.
Nicholas Higham works independently as a solicitor and consultant based in a small
village in Gloucestershire sustained by broadband and the Internet. Nicholas prac-
tice focuses on telecommunications, IT, the Internet, and digital media and includes
regulatory and licensing projects in the telecommunications sector, where he acts for
governments, regulatory authorities, and leading professional firms. Nicholas also
represents small and medium-sized enterprises on commercial matters in his sectors.
He has advised regulators in more than 40 countries, from Western Europe through
the Middle East and Africa to the Far East. Nicholas has been a Director of
PhonepayPlus and of the Independent Mobile Contents Board, regulating content
over mobile networks. He is a co-author of a textbook on Digital Media and a Senior
Visiting Research Fellow at the Centre for Studies in Commercial Law at Queen
Mary, University of London where he lectures on broadcasting law.
Helen Kemmitt is a solicitor in England. She has worked both in-house and in private
practice and has been advising clients in the telecommunications sector for more than
15 years. Between 1992 and 1996 she was a legal adviser for Kingston Com munica-
tions. She joined Baker & McKenzie in 2000 where she is currently a Senior Associate
in the IT/Communications Group focusing on telecommunications regulation and
compliance. She is co-author of the UK Telecoms and EU Privacy Chapters of
Telecommunications Law in Europe (5th edn). Email: helen.kemmitt@bakernet.com.
Gary Lea is an Associate of Buchanan Law, Canberra, Australia, a commercial law
firm with a focus on intellectual property, information technology, and telecommuni-
cations. Gary is currently working on software acquisition and services development
for the firm, dealing daily with a variety of technical standards issues. Previously, he
was a Senior Lecturer in Law at UNSW@ADFA, Canberra (20042007) and, before
that, a Research Fellow and Lecturer at Queen Mary, University of London (1997
2004). Garys interests in legal aspects of technical standards development and
deployment is long-standing (he wrote his first piece on the subject way back in the
mid 1990s), especially in the context of the intersection between intellectual property
and competition/antitrust law.
Contributors xvii
Karen Lee is a lecturer at the School of Law of the University of New England
(Australia) and a PhD candidate at the University of New South Wales. Her thesis
involves an in-depth study of self-regulatory rule making in the Australian telecom-
munications sector. Prior to joining the law faculty at UNE, she worked for Denton
Wilde Sapte (London) in its technology, media, and telecommunications department,
where she specialized in telecommunications regulation (19962003). She was
seconded to the Office of Telecommunications in 1998 and to the Department of
Trade and Industry in 2002, where she was a member of the team responsible for the
Communications Act 2003. She was the Senior Managing Editor of the Federal
Communications Law Journal from 1995 to 1996. She is a qualified lawyer in New
South Wales, Illinois, and England and Wales and is a member of the Australian
Communications and Media Authoritys specialist expert resource list in the areas of
rural and remote issues. Email: karen.lee@une.edu.au.
Graeme Maguire is a partner within Bird & Birds international Communications
Group. He holds an MA in Law from the University of Cambridge and a diploma in
IP Law & Practice from Bristol University. His practice covers commercial and
regulatory communications and technology work and has a strong international fla-
vour. He regularly advises on complex outsourcing projects and also has particular
experience in satellites, e-commerce, data protection, and privacy. He has spoken
and written widely on related topics. Recent publications include the Communications
and Broadcasting Regulation chapter of the 4th edition of Graham Smiths Internet
Law and Regulation (2007). Graeme has spent time on secondment in a competition
policy role at Oftel (now Ofcom) and British Telecommunications and prior to join-
ing Bird & Bird in 2005 was a partner in Linklaters TMT group. Email: graeme.
maguire@twobirds.com.
Christopher Millard (LLB, MA, LLM) is Professor of Privacy and Information
Law at the Centre for Commercial Law Studies, Queen Mary, University of London
and is a Senior Research Fellow of the Oxford Internet Institute at the University of
Oxford. He is also Of Counsel to Bristows where he is a consultant to the informa-
tion technology, privacy, and data protection teams. He has 25 years experience in
the technology and communications law fields and has led many multi-jurisdictional
information governance and data protection compliance projects. He is the author of
many articles and book chapters on privacy, technology, and communications law, is
a General Editor of the International Journal of Law and Information Technology
(Oxford University Press), and is a founding editor of Data Protection Laws of the
World. He was a member of the OECDs Steering Group on Contractual Solutions
for Transborder Data Flows (20002001) and since 2002 he has been a member of
the International Chamber of Commerces Task Force on Privacy and Protection of
Personal Data. Before he joined Bristows in 2008, Christopher was a partner at
Linklaters for six years and head of that firms global privacy practice. Prior to that
he was at Clifford Chance for 18 years, including 10 years as a partner. In 2008, the
xviii Contributors
International Whos Who of Business Lawyers designated him Internet & eCommerce
Lawyer of the Year. Email: c.millard@qmul.ac.uk.
Robin Morton-Fincham is a Senior Legal Advisor within the Legal Team at Visa
Europe, advising on competition law. Prior to joining Visa Europe in 2008, Robin was
a Managing Associate in the Competition Team at Addleshaw Goddard where he
advised extensively on a broad range of competition law matters, including both
domestic UK and EU behavioural Article 81 and 82 EC Treaty cases, as well as national,
EU, and multinational merger control cases. Robin has particular experience in advising
on competition and regulatory related issues within the telecommunications sector,
having also been seconded to Openreach (a BT group business) shortly after its creation
in 2006. Robin trained at Slaughter and May before joining Theodore Goddard.
Edward Pitt is a partner in the Competition Trade and Regulation Group at
Addleshaw Goddard. He has spent more than 25 years in private practice in London
and Brussels. Edward joined the firm in 1998 from the Office of Telecommunications
(Oftel), where he was Senior Legal Adviser. In that role he was particularly involved
with enforcement of telecoms regulation and the control of anti-competitive prac-
tices by telecoms operators; he also advised on reform to the UK telecoms regulatory
regime. He then spent a period with the UK Department of Trade and Industry,
advising on competition policy and on the then UK Competition Bill. In addition to
telecommunications, Edwards experience lies primarily in the sphere of EC and UK
competition and international trade law, and corporate commercial law.
He has acted for multinational clients before the EU Commission, both in
competition investigations and in joint venture and merger clearances. He has also
handled cases before the UK Competition Commission and the Office of Fair
Trading. Edward is an occasional guest lecturer at both commercial conferences and
on university courses. Email: edward.pitt@addleshawgoddard.com.
Jamison Prime is an attorney with the US Federal Communications Commission in
Washington, DC. As chief of the Spectrum Policy Branch of the Office of
Engineering and Technology, he works primarily on rule-making proceedings that
pertain to spectrum allocation and use. Previously, he worked in the agencys
Wireless Telecommunications Bureau on matters ranging from the review of transfer
and assignment applications in major merger cases to inter-agency coordination of
antenna tower regulations. A 1996 graduate of the Indiana University School of Law,
he served as managing editor on and was published in the Federal Communications
Law Journal. He has been an active member of the Federal Communications Bar
Association, where he has served on the law journal and nominations committees.
He received a BA in History from DePauw University in 1993. Mr Primes contribu-
tion was prepared independently from his employment and should not be read as an
official statement of FCC policy. Email: primej@gmail.com.
Contributors xix
David Satola is Senior Counsel in the World Bank Legal Department where he has
global responsibility for legal aspects of reforms in information and communications
technologies, including telecommunications, the Internet, and e-Commerce. His
work focuses on advising governments on legal aspects of the enabling environment
for ICT infrastructure and services, telecommunications licensing, and new market
entry, Internet governance, new technologies, competition regulation involving
ICTs, Critical Infrastructure/Network Security, and Alternative Dispute Resolution.
His project work at the Bank spans more than 80 countries across all the Banks
regions. Prior to joining the Bank in 1997, Mr Satola was in-house counsel for a
major global telecommunications company responsible for its investments in Asia,
Europe, and Latin America, and was in private legal practice in both North America
and Europe advising on telecommunications joint ventures and mobile licensing. He
has published articles, chapters, and books on legal aspects of ICT reforms.
Tim Schwarz is a partner and the Global Head of Telecoms, Media, Technology, and
Intellectual Property at Linklaters. Tim advises telecoms operators, equipment
manufacturers, investment banks, private equity houses, governments, and regulators
on a wide range of global telecoms projects. Between 1995 and 1997, Tim served as
the main telecoms lawyer at the World Bank in Washington DC, working on tele-
coms projects throughout the emerging markets. Since then he has continued to work
on emerging markets telecoms projects and has particular experience in the Middle
East, North Africa, sub-Saharan Africa, Central and Eastern Europe, and Asia. Tim
studied English law at Oxford University and European Union law at the University
of Brussels.
Andrew Sharpe is a Partner in the Competition and Regulatory Group at Charles
Russell LLP. Andrew practises information technology, intellectual property, and
telecommunications law. He regularly lectures on regulatory and commercial aspects
of telecommunications, as well as on information technology, data protection, and
freedom of information issues. In addition to extensive European Union experience,
Andrew has advised on telecommunications issues in Africa, the Caribbean, and the
Middle East. Prior to qualifying as a solicitor, Andrew was a Royal Air Force engi-
neering officer. He was a communications-electronics specialist, responsible for the
maintenance of airfield radio, radar, telecommunications, and information technology
systems. Andrew has both a BSc in Electronic Engineering and an LLB (First Class)
from Southampton University. Andrew qualified in 1999 and prior to joining Charles
Russell in 2002 was a telecommunications regulatory lawyer at Clifford Chance.
He was made a partner in 2007. Email: andrew.sharpe@charlesrussell.co.uk.
Michael Sinclair is a partner and London head of the Information, Communications,
and Technology Group at Simmons & Simmons. He advises on global communica-
tions services outsourcings with suppliers such as BT, AT&T, Orange Business
xx Contributors
Services, and Verizon Business. He has a PhD in Law (Gonville & Caius College,
Cambridge) and is co-author of several texts on outsourcing.
Mark Williams is a Senior Economist in the Global ICT group of the World Bank
in Washington DC where he specializes in the reform and regulation of telecommu-
nications networks. At the World Bank, he has been closely involved in the design
and implementation of open-access regimes for telecommunications infrastructure
in developing countries, particularly in Africa and the Middle East. Prior to joining
the World Bank, Mark was a professional economist at Frontier Economics Ltd in
London. In this role, he advised governments, regulators, and private companies
around the world on the economics and regulation of the telecommunications and
postal industries. He regularly publishes articles in journals and contributes to books
on the subject.
Rhys Williams is a partner within Bird & Birds International Communications
Group. He holds an MA in Law from the University of Cambridge and he has also
studied at the University of Manchester and the University of North Carolina, Chapel
Hill. He has specialized for over 14 years in providing commercial and regulatory
advice to clients in the communications and technology sectors, both in the UK and
internationally, ranging from entrepreneurial start-ups to major multinational corpo-
rations. He regularly advises on complex outsourcing projects and also has particular
experience in e-commerce, data protection, and privacy. He has advised a number of
clients on the implementation and roll-out of innovative new technologies, including
mobile micro-payment systems, WiFi solutions, and VoIP services. Rhys has twice
spent time on secondment to clients. Email: rhys.williams@twobirds.com.
Contributors xxi
Part I
THE FUNDAMENTALS
1
TELECOMMUNICATIONS LAW AND
REGULATION: AN INTRODUCTION
Ian Walden
1.1 The Subject Matter 3
1.2 The Telecommunications Sector 4
1.3 Technology and Terminology 5
1.4 Telecommunications Law and Regulation 7
1.5 Liberalization and Regulation 9
1.6 Liberalization and Privatization 10
1.7 Policy, Law, and Regulation 11
1.8 Regulatory Framework 13
1.9 Regulatory Powers 14
1.10 Regulatory Models and Methods 16
1.11 Regulation and Competition Law 18
1.12 Regulation and Standards 20
1.13 Regulating in the Global Economy 21
1.14 Concluding Remarks 22
1.1 THE SUBJECT MATTER
This third edition of the book continues to be entitled telecommunications rather than
communications, despite the best attempts of the European Commission to recast the
terminology to reflect the fact that the legal and regulatory framework embraces all
forms of infrastructure, services, and equipment supplied for the transmission of data
and information, whether traditionally viewed as broadcasting or voice telephony.
Telecommunications remains the preferred term for a number of reasons. First, the
4 1. Telecommunications Law and Regulation: An Introduction
change of regulatory terminology is still not reflected in industry discourse, let alone
among the wider general public. Second, the book is intended as a text for a global
audience, not just the UK or Europe, so it does not seem appropriate for EU terminology
to be imposed on our readers. Third, the many historical and cross-jurisdictional aspects
of the book recommend consistency as an aid to comprehension. The book does, how-
ever, use the terms telecommunications and communications interchangeably.
1.2 THE TELECOMMUNICATIONS SECTOR
The World Trade Organizations (WTO) Basic Agreement on Telecommunications,
in 1997, can be seen as a defining moment in the international communitys
commitment to the structural evolution of the sector from a primarily monopolistic
environment to a competitive marketplace. Such acceptance has been driven by a
recognition that telecommunications is a strategic economic sector, in terms of it
being both a tradable service in its own right as well as the infrastructure over which
other goods and services are traded and, in an age of electronic commerce, delivered.
There is no doubting the continuing dynamic nature of the telecommunications sector
within the global economy, despite the massive downturn experienced by the sector
following the bursting of the dotcom bubble. By 2000, world stock markets rose and
fell in large part based on perceptions of the health and wealth of the telecommunica-
tions sector. Indeed such was the dependency that financial regulators expressed
concern over the exposure of the banking system to the fortunes of telecommunica-
tions companies.
1
Since then, the market has seen large-scale bankruptcies, such as
Global Crossing, the exposure of fraudulent trading practices, such as WorldCom, and
massive sectoral restructuring. While the 1990s saw a proliferation of new market
entrants, the first few years of the 21st century saw many of these disappear without
trace or become collections of devalued assets awaiting a bargain-hunter.
However, over the past four years the sector has begun to expand again, as the global
economy has recovered, and the strategic role of the telecommunications sector has once
again come to the fore although the recent downturn may again reverse this trend.
While the financial environment for the telecommunications industry fluctuates,
the rapid developments in technology that underpin the sector and the consequent
introduction of new products and services into the market has continued at the same
frantic pace. As in any area of law, telecommunications involves use of a particular
set of terminology with which a practitioner or student needs to become familiar.
Such terminology relates, in large part, to the technology being used, the structure of
the industry, and the products and services being supplied. These issues are examined
in the next section and in detail in Chapter 2.
1
See Financial Services Authority Press Release, Telecoms lendingfirms must remain vigilant,
FSA/PN/153/2000, 7 December 2000.
5
1.3 TECHNOLOGY AND TERMINOLOGY
2
Only a few years ago, the scope of telecommunications technology would have been
easy to define: telephony, fax, and mobile. However, now there is a rapidly changing
technological environment, which means even systems that we use every day, like
the telephone, are now regarded as being legacy technology (see Chapter 2). The
current drivers for change are simple: the ever increasing use of the mobile and the
Internet. In many countries we already see fixed-mobile substitution, where users
prefer to use their mobile telephone to make a call, even though they have a landline
available; while in developing countries, mobile is by far the most dominant technol-
ogy. Voice over the Internet has also meant that it is technically possible to make very
cheap telephone calls from anywhere in the world by connecting over the Internet to
a service provider in the destination country, who then routes the telephone call
locally. Going even further, instant messaging systems (like Microsofts MSN
Messenger) provide the capability of making voice and video calls directly between
PCs free of charge.
However, while these services and capabilities are evolving rapidly, a lot of the
underlying technologies are common. In all systems there are fundamental catego-
ries of equipment that the telecommunications network, of whatever type, must use.
These are:
transmission systems;
switching or routing equipment;
terminal equipment;
network management systems; and
billing systems.
In addition, it is often useful to distinguish between the access network (the con-
nection from the customer to the network) and the core network (connections
between network elements).
Transmission systems transfer information from one location to another, with as
low probability of error as possible, over wireline (i.e. physical) or wireless (i.e.
radio) links. Nowadays most transmission systems in the core network use optical
fibres, although some legacy systems using copper cables still exist. Fixed
point-to-point radio links are also used where the terrain is difficult or where the
network node (particularly a base station in mobile networks) is isolated.
At the level of the access network there is a wide variety of different transmission
systems. One of the challenges in getting broadband services to residential custom-
ers is the cost of replacing the old twisted metallic pair telephone cables, and much
2
Professor Laurie Cuthbert, Head of the Department of Electronic Engineering at Queen Mary,
University of London, drafted this section.
1.3 Technology and Terminology
6 1. Telecommunications Law and Regulation: An Introduction
effort has been spent in improving the technology to allow higher bit rates over these
copper cables, since the cost of replacing them is prohibitive. ISDN was the first
solution, but now this is regarded as obsolete and ADSL (Asynchronous Digital
Subscriber Line) allows broadband to be offered to residential customers over their
existing telephone lines, at least to those who are close enough to the telephone
exchange. Other fixed access transmission systems use coaxial cables (cable TV
and cable modems), optical fibres (generally to business customers), or point-to-point
radio links.
In mobile networks, the access network is the link between the mobile handset
and the network base station (or BTSBase Transceiver Stationas it is called in
GSM (Global system for mobile communications) networks). The type of network
(GSM, CDMA (Code Division Multiple Access), 3G) defines the type of transmis-
sion used over the radio link. Another radio access method that is becoming very
common is that for WLANs (Wireless Local Area Networks), often known as
WiFi. The common standard for this is IEEE 802.11b but the newer version IEEE
802.11g provides about five times as much capacity over the same radio link. Almost
all laptop computers now being produced include built-in 802.11g wireless access.
Within organizations the predominant access technique for computer communica-
tions is Ethernet using Unshielded Twisted Pair (UTP) cables, although WLANs
are increasingly being implemented now that the security of such systems is being
improved.
While transmission systems get information from A to B, users want to be able to
connect to different people, or to different websitesthis means that connections
have to be switched or routed to the right destination. With telephone networks
this was done using switches (called exchanges in the UK) but with Internet-type
networks (IP networks) the devices performing that function are called routers. The
reason for this difference is that telephone networks are traditionally circuit-
switched, whereas IP networks are packet-switched. Circuit-switched means that
a connection is set up for the whole duration of a telephone call; in packet switching,
information is broken into units called packets that are independently routed across
the network. The important differences between the two techniques are that:
circuit-switched networks need to have a method of setting up a connection from
A to B before any information is sent, and packet networks do not;
the routing decision for every packet increases the flexibility and reliability of
the network as packets can even be re-routed during a call, but does increase the
overhead;
the delay in a circuit-switched network is fixed, but in packet networks the nature
of the packet routing means that delays between packets can be very variable;
it is much harder to guarantee Quality of Service (QoS) over packet networks.
Overall this means that packet-switched networks are generally better suited for data
connections and circuit-switched networks for voice (which is particularly sensitive
7
to delay and variations in delay). However, the predominance of packet-based IP
(Internet Protocol) for computer communications has led to a major change in how
networks are structured, with telephony networks moving to using IP rather than
circuit switching. Indeed 3G mobile networks will eventually use IP for all traffic
within the network. This change has been enabled as a result of several years of
intense research effort to get good quality voice communications with IP. The differ-
ence between routers and switches is in fact much more complex (and confusing)
than the simple explanation above. IP traffic often passes through equipment called
switches in the local area networkand these have a different function.
To complicate matters even further, new architectures for IP networks introduce
the concept of switched routers; the new architecture that is most likely to succeed
is MPLS (multi-protocol label switching).
In the business world, the local telephone system (PBXPrivate Branch
Exchange) has evolved from being a traditional telephony switch to a fully IP system
with IP phones, or even with soft phones on the workstation. Of course, no network
would work if the user did not have any equipment to use with it and it is often the
capabilities of the terminal equipment that attracts users rather than that of the
underlying network. For instance, in GSM networks the codecs (the devices that
convert speech to digital signals and back again) were improved some years ago to
make the speech sound more like that on a landline; however, almost no users would
have upgraded their mobile handset for that reason.
An important aspect of any communications network is its reliability and availa-
bility, particularly when congestion occurs. Ensuring this is a function of network
management systems, i.e. complex software programs that control the operation and
performance of the various network elements; this is true of all types of network,
whether telephony, mobile, or Internet.
Also of crucial importance is the billing systemno network operator could
survive in business without one! Modern telephony billing systems are very compli-
cated, recording the details of every transmission and applying a wide range of tariffs
based on the type of network user (e.g. retail or wholesale customer or interconnect-
ing operator) and type of communication services (e.g. text messaging and voice
calls). The Internet has utilized very different tariff structures from traditional tele-
phone networks, such as flat rate rather than minute-based tariffs, which has enabled
the implementation of much simpler (and cheaper) billing systems. However, there
are now signs that volume-based charging (where the user pays for the overall
amount of data transferred) are starting to appear for Internet use, so billing systems
to capture that information are becoming increasingly important.
1.4 TELECOMMUNICATIONS LAW AND REGULATION
This book is primarily concerned with the rules and regulations governing the
provision of telecommunications equipment, network infrastructure, and services
1.4 Telecommunications Law and Regulation
8 1. Telecommunications Law and Regulation: An Introduction
(e.g. the carriage of voice and data traffic), rather than the law governing the content
of the traffic being sent across telecommunication networks. The latter is generally
perceived as the domain of media law
3
or Internet law rather than telecommuni-
cations law. However, one recurring issue in telecommunications law is the problem
of distinguishing clearly between issues of carriage and issues of content, particu-
larly with the emergence of new services such as Internet telephony. In this edition,
therefore, a specific section addresses content issues, in respect of personal data
(Chapter 13), as well as broadcasting and related regulatory regimes for content
(Chapter 14). Even the categorization of carriage as a service is evolving, with the
development of commodity markets for trading carriage in terms of telecommunica-
tion minutes.
4
Such economic recategorization may have profound implications for
policy makers and regulators.
The various aspects of telecommunications law addressed in this book can be
broadly distinguished into competition issues and non-competition public policy
issues. Competition law is primarily concerned with establishing and ensuring the
sustainability of competitive markets, at a national, regional, and global level.
Telecommunications as a sector capable of establishing a comparative advantage in
international trade was recognized by the UK government at the outset of liberaliza-
tion, in the early 1980s. In the Telecommunications Act 1984, for example, four of
the ten general duties imposed upon the regulator addressed trade-related aspects of
telecommunications, from encouraging the provision of transit services, traffic being
routed through the UK, to the supply of telecommunications apparatus (s 3(2)). For
developing countries, the prospect of becoming a regional hub in the emerging infor-
mation economy is promoted as an opportunity arising from market liberalization.
Non-competition public policy issues have historically focused on the provision
of telecommunication services to the population as a whole: the issue of universal
service. Current concerns about the growth of a digital divide between the informa-
tion rich and poor is the latest manifestation of such political imperatives. However,
other non-competition issues include consumer protection, environmental concerns,
health and safety matters, as well as the protection of personal privacy.
It is inevitable that the seismic shifts in the structure of the telecommunication
sector are reflected in a complex and rapidly changing legal framework. The liber-
alization of the sector has usually required significant legal intervention, the classic
exemption to the rule being New Zealand, which initially simply opened up the sector
to competition without the imposition of a regulatory framework, but has subsequently
had to establish a regulatory authority.
5
In parallel with the pursuance of liberalization,
the telecommunications sector has experienced rapid and dramatic developments in
3
Walden, I, Media Law and Practice (Forthcoming 2009).
4
e.g. RouteTrader <http://www.routetrader.com>.
5
All restrictions on the supply of services were removed in 1989. However, by 2001, a Telecommuni-
cations Commissioner was appointed within the Commerce Commission, with substantial further
enforcement powers being granted to the Commissioner in 2006.
9
the technology, which has compounded the problems faced by policy makers, legisla-
tors, and regulators when trying to establish legal clarity and certainty for an indus-
try undergoing convergence with other industries.
6
The Internet, with the availability
of services such as voice telephony and web-casting, is the classic example of this
technological phenomenon. The existence of a clear legal and regulatory distinction
between issues of carriage, the primary focus of the book, and issues of content is
therefore dissolving in the face of such technological change.
This chapter introduces some of the key themes present within the field of telecom-
munications law. These themes are then considered in greater detail in one or more
of the following substantive chapters.
1.5 LIBERALIZATION AND REGULATION
The telecommunications industry has undergone a fundamental change in structure,
from that of monopoly to one of competition. Many of the laws and regulations
examined in this book are concerned with this process of change: regulating for
competition. However, the notion of what type of competition is being sought has
sometimes distinguished the response of legislators and regulators.
The telecommunications market can be very crudely divided into equipment, net-
works, and services. Liberalization of the market for telecommunications equipment
has been subject to the broadest consensus among policy makers, reflecting conditions
in the broader IT products market. The provision of telecommunications services has
experienced a similar general consensus, except in respect of voice telephony.
It is at the level of the network, constructing the physical communications infrastruc-
ture, that debate over liberalization continues to be heard. Historically it was argued that
telecommunications networks were natural monopolies, that replicating the physical
infrastructure was inevitably uneconomic. Whilst such arguments seem arcane in most
developed economies, there continue to be those that argue that some form of single
network platform is a feasible policy alternative, particularly in developing countries
and partly driven by environmental concerns. In addition, the natural monopoly position
continues to have relevance in the provision of broadcast networks and wireless telecom-
munication services. Although technological developments are continually improving
our exploitation of the radio frequency spectrum, the market for wireless services may
remain oligopolistic if not monopolistic, with associated competition concerns.
One of the historic myths of telecommunications liberalization was that it would
arise through market deregulation, a feature of the related and, indeed, converging IT
industry. To date, however, the reality has been quite the opposite. The telecommuni-
cations sector has become a heavily regulated sector in order to ensure the transition
6
However, see also Standage, T, The Victorian Internet (Phoenix, 1998), which describes the revolu-
tionary impact of the telegraph.
1.5 Liberalization and Regulation
10 1. Telecommunications Law and Regulation: An Introduction
to competition, as manifested in part by the increasing scope and amount of material
covered in this book. Such regulation has focused primarily on controlling the
activities of the incumbent operator in order to facilitate market entry for new providers.
However, public policy concerns in respect of universal service and consumer pro-
tection issues are also present.
As markets become fully competitive, deregulation has reappeared as a policy
objective, sometimes embodied in legislation. Again, as with the sector as a whole, the
shift towards deregulation has arisen not only because competitive markets are matur-
ing, but also through technological developments, such as the Internet. In the US, for
example, the Telecommunications Act 1996 imposes a general obligation upon the
Federal Communications Commission to both forbear from the imposition of regula-
tions under certain conditions, as well as engage in biennial reviews of the existing
regulatory framework to remove those regulations identified as no longer necessary
in the public interest as the result of meaningful economic competition between pro-
viders of such service (47 USC 160161). Similarly, in the UK, a specific duty has
been placed upon Ofcom, the UK regulatory authority, to review the regulatory frame-
work and remove any unnecessary burdens (Communications Act 2003, s 6).
Complementing the move towards deregulation, some jurisdictions have also
given explicit statutory recognition to the role of industry self-regulation in certain
areas. In Australia, for example, the Telecommunications Act 1997 states:
The Parliament intends that telecommunications be regulated in a manner that . . . promotes
the greatest practicable use of industry self-regulation. (s 4)
Similarly, in the UK, the Communications Act 2003 requires Ofcom to have regard
to the possibility of addressing regulatory matters through effective self-regulation
(s 6(2)). The technical complexity of the telecommunications market has always
meant that much of the regulatory input on particular issues, such as interconnection,
simply consisted of the convening and oversight of particular industry groups, inter-
vening only in the event of impasse. However, as regulators reduce or withdraw from
market intervention, then increasingly reliance is likely to be made upon the industry
to regulate itself.
1.6 LIBERALIZATION AND PRIVATIZATION
A third concept often linked in the past with liberalization and deregulation was that
of privatization: the conversion of the incumbent operator from being a state-owned
public body to a privately owned entity. As with deregulation, the nature of the rela-
tionship with the process of liberalization has been far from straightforward. The
policy drivers behind privatization of the incumbent have tended to be based
around state revenue concerns rather than the objective of liberalization. The provi-
sion of a modern telecommunication infrastructure requires massive capital invest-
ment, a funding burden which governments are no longer prepared to shoulder.

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